Understanding special economic zone policy in China : a conceptual framework and two cases

Abstract

As a prominent place-based policy (PBP) in China, special economic zones (SEZ) contribute a substantial portion of GDP using very little land. Similar practices such as enterprise zones, industrial parks, and business districts widely exist in other parts of the world, but studies of such PBP's effects in the United States and Europe show both positive and negative outcomes. Recent studies on China's SEZs and industrial parks show a positive agglomeration and spillover effect, which indicate effective coordination through the visible hand--policy intervention. However, empirical studies also show problems of over-investment and spatial misallocation. To complement existing empirical evidence of the outcome of SEZs, I propose a conceptual framework to help understand the development model of China's SEZs utilizing an analysis of two specific case studies, Bazhong New Economic Zone in Sichuan Province, and Gu'an High-tech Special Economic Zone in Hebei Province. In this framework, I propose three modules to examine an SEZ, including the formation of the central coordinator, the industry selection mechanism and outcome, and a conceptual cash flow model. This thesis finds that the SEZs which are collaborated with private developers are more likely to be successful than the Government-led SEZs. It discusses the reasons for and implications of this tendency.